Re: [OPE-L] standard commodity

From: Andrew Brown (A.Brown@LUBS.LEEDS.AC.UK)
Date: Wed Mar 23 2005 - 14:15:54 EST

Hi Ajit,

Well, your first comment was no doubt in total jest but it really got me

You write, 'you may be interested in ghost stories and
ghosts may be having real influence in many people's

Do you mean that 'generalised exchange value' or purchasing power is not
real? Or that it is? Or that it is not real but does have effects? How
can something that is not real have effects? Is it a ghost?!:) Your
comment may be in jest but in fact parallels Marx's reference to the
'ghostly' nature of value. As a materialist I don't believe ghosts exist
(!) but I take the evident causal efficaciousness of purchasing power to
be a challenge to materialism because it is hard to find a material
ground for it. Sraffa's 'given techniques' provide no such ground,
contra Steedman's view, because in reality techniques are not given
forever but themselves part and parcel of a general social process that
is seemingly dominated by general purchasing power (the profit motive).

How do you see all this? Do we just look at the language game and eschew
reference to purchasing 'power' beyond any such game? The trouble with
this is that it seems to leave us bereft of the ability grasp capitalist
reproduction and development. If it dispels the illusion that we are
dominated by a ghost, it leaves us with the impression that we are
dominated by an illusion. How, then, does the society reproduce?

Uh oh, is this mumbo jumbo again? Sorry... :)

But that does not mean that my paper or Sraffa
or anyone else must deal with ghost stories. The
problem appears to me is that you have a private
meaning of numeraire. Our paper deals with numeraire,
which has a well defined meaning in economic theory,
particularly in the theory that our paper is designed
to critique. How about if I say that poverty is the
most serious economic problem and your theory says
nothing about how to measure poverty or reduce
poverty. So, there! That's my criticism of your
theory. You will be legitimately allowed to say,

I reply: Your paper, in the conclusion, says that economic science as
such is fundamentally limited (this is also what you say in your
previous papers on Sraffa, and what intrigues me). This is more than an
immanent critique of general equilibrium (unless you equate 'economic
science' with 'general equilibrium theory'). It is on the terrain of
this large claim of yours that I have been arguing. The object of both
your claim and my response is the same: economic science. Thus we, of
course, have the same *definition* of the numeraire but it is the
*significance* of the numeraire to economic science, and indeed the
significance of economic science, that is at issue.

You write: 'Yes, but the statement that it has "a positive
relationship" does not make sense. First of all if
value theory has to explain why 'one quarter of corn =
x cwt. of iron', as Marx put it, then in that case the
statement that labor and prices have positive
relationship is meaningless. So you will have to say
that well, 'value theory is not designed to solve the
problem Marx posed for it. It is supposed to explain
why one quarter of corn which used to exchange for x
cwt. of iron, now exchanges for y cwt. of iron? And
your statement means that in this case, the change in
the prices can only be explained by changes in the
labor values, i.e., if y is smaller than x, then the
relative labor content of iron must have increased.
This is the only meaning I can make of your positive
relationship statement. So let's see how far your
statement goes in this case. Now since Ricardo it is
well known that the exchange ratio between corn and
iron could change simply because the distribution of
income between wages and profits changed without any
change in the direct and indirect labor content of the
two commodities. So what would your statement in this
case mean? Where is the beef?'

I reply: The answer to your question is that, as previously mentioned,
there is not an exactly proportional relationship. Why not take Ricardo
himself and say, following Stigler's mischievous interpretation, a
correlation of 93 percent?

You continue, 'Now let me hummer you
further. Let us suppose I assume that income
distribution remains the same, then you would say that
in this case the price change must have come about
because of technical change and this price change is
explained by the changes in labor values. But to
establish any claim like that you will have to
establish a relationship between labor-values and
exchange rate to begin with, which your first
statement logically cannot do. That's why I keep
saying that to establish that labor-values explain the
changes in prices you will first have to establish a
relationship between labor-values and prices, which is
the real question of the labor theory of value. There
is no escape from it'.

I reply: See above.

You write, 'as far as what I think about
labor and all this--may be some other time'.

Ajit this isn't fair!:) Come on, I've 'owned up'... what are your

Many thanks,


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